Comprehensive analysis of market conditions in the foreign exchange market: Fluctuation scaling and variance-covariance matrix

Aki Hiro Sato; Takaki Hayashi; Janusz A. Hołyst

doi:10.1007/s11403-012-0089-2

Comprehensive analysis of market conditions in the foreign exchange market: Fluctuation scaling and variance-covariance matrix

Aki Hiro Sato, Takaki Hayashi, Janusz A. Hołyst

Graduate School of Business Administration

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

Abstract

We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of transactions) for various currency pairs and the corresponding standard deviations holds for a majority of the weeks. However, the scaling breaks in some time intervals, which is related to the emergence of market shocks. There is a monotonous relationship between values of scaling indices and global averages of currency pair cross-correlations when both quantities are observed for various window lengths Δt.

Original language	English
Pages (from-to)	167-179
Number of pages	13
Journal	Journal of Economic Interaction and Coordination
Volume	7
Issue number	2
DOIs	https://doi.org/10.1007/s11403-012-0089-2
Publication status	Published - 2012 Oct

Keywords

Fluctuation scaling
Foreign exchange market
Global average of cross-correlations
Scaling breaking

ASJC Scopus subject areas

Business and International Management
Economics and Econometrics

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10.1007/s11403-012-0089-2

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title = "Comprehensive analysis of market conditions in the foreign exchange market: Fluctuation scaling and variance-covariance matrix",

abstract = "We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of transactions) for various currency pairs and the corresponding standard deviations holds for a majority of the weeks. However, the scaling breaks in some time intervals, which is related to the emergence of market shocks. There is a monotonous relationship between values of scaling indices and global averages of currency pair cross-correlations when both quantities are observed for various window lengths Δt.",

keywords = "Fluctuation scaling, Foreign exchange market, Global average of cross-correlations, Scaling breaking",

author = "Sato, {Aki Hiro} and Takaki Hayashi and Ho{\l}yst, {Janusz A.}",

note = "Funding Information: Acknowledgments This work was supported by the Grant-in-Aid for Young Scientists (B) by Japan Society for the Promotion of Science (JSPS) KAKENHI (#23760074) (A.-H. Sato). It was also financially supported by the Japan Securities Scholarship Foundation (T. Hayashi). This was also supported by the European COST Action MP0801 Physics of Competition and Conflicts and by the Polish Ministry of Science Grant 578/N-COST/2009/0 (J.A. Holyst).",

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doi = "10.1007/s11403-012-0089-2",

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AU - Sato, Aki Hiro

AU - Hayashi, Takaki

AU - Hołyst, Janusz A.

N1 - Funding Information: Acknowledgments This work was supported by the Grant-in-Aid for Young Scientists (B) by Japan Society for the Promotion of Science (JSPS) KAKENHI (#23760074) (A.-H. Sato). It was also financially supported by the Japan Securities Scholarship Foundation (T. Hayashi). This was also supported by the European COST Action MP0801 Physics of Competition and Conflicts and by the Polish Ministry of Science Grant 578/N-COST/2009/0 (J.A. Holyst).

PY - 2012/10

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N2 - We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of transactions) for various currency pairs and the corresponding standard deviations holds for a majority of the weeks. However, the scaling breaks in some time intervals, which is related to the emergence of market shocks. There is a monotonous relationship between values of scaling indices and global averages of currency pair cross-correlations when both quantities are observed for various window lengths Δt.

AB - We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of transactions) for various currency pairs and the corresponding standard deviations holds for a majority of the weeks. However, the scaling breaks in some time intervals, which is related to the emergence of market shocks. There is a monotonous relationship between values of scaling indices and global averages of currency pair cross-correlations when both quantities are observed for various window lengths Δt.

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KW - Foreign exchange market

KW - Global average of cross-correlations

KW - Scaling breaking

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Comprehensive analysis of market conditions in the foreign exchange market: Fluctuation scaling and variance-covariance matrix

Abstract

Keywords

ASJC Scopus subject areas

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